Thailand may not be the most critical market for Chinese automakers going global, but it is undoubtedly the one with the most outstanding and stable performance. In just a few years, Chinese OEMs (Original Equipment Manufacturers) have gone from having almost no presence to capturing nearly a 30% market share, and they hold an absolute 90% dominance in the electric vehicle (EV) segment—meaning nine out of every ten EVs sold are Chinese brands.
So, what has the Chinese automotive industry experienced in Thailand? What factors have driven such remarkable achievements for Chinese cars in Thailand? How much further can Chinese automakers expand in Thailand? And what kind of employment impact will the rapid surge in China's market share bring?
Based on Rhodium Group's research report on Chinese automakers going global in Thailand, this article shares insights into the overseas expansion of Chinese cars in Thailand, hoping to provide inspiration and experience for Chinese automakers expanding into other countries and regions.
The Cornerstone of Success - Trade Agreements and Policies
Although Chinese automakers have secured decent market shares in most markets outside North America, two unique factors lie behind their rapid success in Thailand: the Thailand-China Free Trade Agreement and Thailand's EV support policies.
In fact, Thailand imposes tariffs of up to 80% on imported cars, but tariffs on imports from free trade partner countries are much lower. Under the Japan-Thailand Economic Partnership Agreement, Japanese-made cars entering Thailand are subject to only a 20% tariff. However, the agreement Thailand signed with China in 2003 means that Chinese-made EVs are exempt from any tariffs, granting Chinese exporters a massive competitive advantage.
Furthermore, to reduce reliance on oil imports and achieve its climate goals, the Thai government has introduced a series of generous EV incentive programs. Launched in 2022, the "EV 3.0" program includes direct cash subsidies for car buyers, excise tax reductions for eligible EVs, and import tax exemptions coupled with offset requirements, meaning imported vehicles must be compensated by a certain number of locally produced vehicles (see Table 1).
Although the Thai government also offers various tax cuts and subsidies to promote local production and increase the localization rate, the delayed implementation of the offset requirements (starting only in 2024) has allowed Chinese automakers not only to export EVs to Thailand tax-free for two years but also to benefit from highly favorable tax and subsidy policies.
Naturally, Chinese EV manufacturers have flocked to the market. By mid-2025, over a dozen Chinese brands had entered the Thai market, with the largest Chinese companies (BYD, Changan, Chery, Great Wall, and SAIC) accounting for the majority of sales. By the end of 2025, Chinese EV manufacturers had captured an 89% share of the Thai EV market.
The success of Chinese cars in Thailand stems from their rapid response and thorough preparation for Thailand's EV programs, as well as the provision of high cost-performance and diversified EV products tailored for the Thai market. Naturally, the mass entry of Chinese cars has also brought Chinese domestic car pricing to Thailand. According to data from the Thai economic research institution Krungsri, compared to the 2023 Thailand International Motor Expo, prices for Chinese EV brands dropped by 10.2% at the 2024 Thailand International Motor Expo. Half a year later, at the Thailand International Motor Expo, prices were reduced by another 13.1%.
It was not until2025 that prices stabilized, with the decline narrowing to 2.7%. According to the latest information from May 2026, the price difference between Chinese and non-Chinese EVs is as high as 50%. The low prices also come with additional perks, such as base models featuring full configurations including numerous digital functions, battery warranties of over 8 years, free charging station installation, and favorable financing terms.
In December 2025, Chinese EV sales peaked as automakers sought to capitalize on the EV subsidy policies expiring in January 2026. Sales plummeted in January 2026 but rebounded to near-2025 levels within just a few months—and the market share of Chinese EVs remained stable. The question now is whether Chinese automakers can maintain this successful momentum.
In fact, three crucial factors need to be considered:
First, given fiscal pressures, rising global energy prices caused by the Iran war, and a persistently weak economy, can Thailand sustain its EV programs in the medium term;
Second, can Chinese automakers meet the offset standards set by the Thai government and comply with the stricter localization requirements under Thailand's "EV 3.5" policy;
Third, can Chinese automakers withstand local government scrutiny regarding the economic and employment impacts brought about by their rapid entry into the Thai market.
Hurdle One - The Fiscal Challenge
Therefore, the success of Chinese automakers in Thailand is closely tied to Thailand's generous EV support policies. The future development of Chinese cars in Thailand depends, at least in part, on whether Bangkok can continue to implement these policies, especially amid an overall weak economy and slowing car sales. From a fiscal perspective, the burden of the policy itself is not heavy.
By early 2025, the Thai government had subsidized approximately 175,000 battery electric vehicles (BEVs) and 35,000 electric motorcycles, with total subsidies amounting to about 12 billion baht (approximately 360 million USD) over the first three years of the policy's implementation. This accounts for less than 0.5% of Thailand's annual budget. The government has revised EV incentives under the "EV 3.5" plan, reducing subsidy amounts from 2024 to 2027. The plan also involves tax cuts, which will increase Thailand's fiscal revenue, but these cuts are unlikely to be significantly higher than the subsidy amounts. Nevertheless, due to the immense fiscal pressure Thailand faces, EV programs will have to compete with other priorities.
Thailand's fiscal deficit exceeded 3% of GDP in 2025 and is projected to approach 3.5% in 2026, as the country rapidly nears its self-imposed 70% debt ceiling. High global energy prices have further dampened already sluggish economic growth expectations.
By mid-2026, the Thai government is seeking Constitutional Court approval to borrow 400 billion baht (approximately 12.2 billion USD) to mitigate the economic impact of the Iran war through consumer subsidies and funding for the long-term transition to clean energy. Thailand's EV program also depends on the success of its localization push (see below), as the program aims not only to promote EV adoption but also to drive production back home. Local production will generate industrial activity and related tax revenues. If these goals are not met, the program may at least need to be adjusted.
Finally, fiscal capacity is critical because a structural constraint in Thailand's EV market is charging infrastructure. China has made significant progress in major cities like Bangkok, where charging infrastructure is well-developed. However, in rural areas, internal combustion engine (ICE) vehicles still dominate (and thus, Japanese automakers also dominate), and the market remains heavily reliant on used or even third-hand cars.
Of course, China also exports ICE vehicles, but these complete vehicle exports are subject to an 80% tariff, and exports of completely knocked down (CKD) parts are subject to a 30% tariff, meaning they cannot enjoy the same tax benefits as EVs. The Thai government is ambitious in pushing for electrification in the transportation sector, but further investment will naturally be constrained by fiscal space and overall economic performance. If EV adoption stagnates, sales for Chinese automakers may also decline accordingly.
Hurdle Two - The Localization Challenge
The continued expansion of Chinese automakers in Thailand will also depend on their ability to "offset" the cars they directly export to Thailand with locally produced vehicles.
In addition to the zero tariffs under the China-ASEAN Free Trade Area (CAFTA) agreement, Chinese car exporters have benefited from generous subsidies (equivalent to 7.5% to 10% of the EV price) and excise tax reductions provided by Thailand's EV 3.0 and 3.5 programs. However, Chinese automakers now need to offset these exports through local production, with an increasingly higher proportion of local production required (see Table 1).
Thailand's EV 3.5 program also introduced stricter local production requirements in exchange for continued tax cuts. This localization process is underway. According to data from Rhodium Group (Figure 3), direct investment from China in Thailand's EV sector surged between 2021 and 2023, averaging 550 million USD annually. This growth likely reflects Chinese EV manufacturers' attempts to capitalize on Thailand's EV support policies. This has made Thailand the third-largest global destination for direct investment in Chinese EV manufacturing, trailing only Hungary and Brazil, but ranking first in terms of the number of factories.
Although the growth rate of foreign direct investment in China's EV-related sectors has slowed since 2023, eight Chinese automakers have currently announced plans to build EV assembly plants in Thailand (BYD, Great Wall Motor, Changan Automobile, SAIC Motor, Chery Automobile, Hozon Auto (which is now deeply mired in a 400 million RMB Thai debt crisis), GAC Group, and Wuling Automobile). As of the second quarter of 2026, most of these plants are already operational (Table 2).
Some capacity has been expanded on the basis of existing facilities: for example, SAIC Motor converted an ICE vehicle plant in Chonburi Province into an EV production base, while Great Wall Motor acquired a former Ford Motor plant. However, most automakers have built new production lines.
As assembly plants are successively completed, battery investments have also grown rapidly. Great Wall's SVOLT entered the Thai market to supply Great Wall Motor; SAIC Motor invested to support its plant construction; and Gotion High-Tech followed its customer Nuovo Plus into the Thai market. However, the current focus remains on low value-added, low capital expenditure battery module assembly. The first true battery cell manufacturing plant was not announced for production until 2025: Sunwoda invested approximately 1 billion USD, with a planned capacity of 17.4 GWh, enough to supply about 300,000 EVs.
Beyond batteries, Chinese auto parts manufacturers have long been active in the Thai market, especially in the tire value chain (Figure 4). Thailand is the world's largest producer of natural rubber, a major automotive market and export hub, and offers preferential policies to circumvent U.S. trade remedies against Chinese-made tires.
However, since 2023, foreign direct investment in Thailand's auto parts sector has diversified into other segments of the supply chain, including chassis systems, interior parts, transmission components, and EV-specific products. This is mainly due to suppliers following automakers' steps to expand their businesses overseas, as well as automakers' increasing demands for localization rates.
Furthermore, foreign direct investment in China's electronic manufacturing industry has also surged, particularly for printed circuit boards (PCBs) used in automotive production. Over the past three years, efforts by Chinese automakers to enhance local production capabilities have made China the largest automotive investor in Thailand, surpassing its traditional partner Japan in investment volume (Figure 5).
However, by 2025, Japanese automakers, including Toyota and Honda, made a strong comeback, planning to invest 50 billion baht (approximately 1.5 billion USD) each to participate in Thailand's EV development programs. Isuzu and Mitsubishi also announced investments of 30 billion baht and 20 billion baht, respectively, to produce EVs in Thailand.
Although investments by Chinese automakers have begun to translate into higher local production, peaking at nearly 12,000 units in September 2025 (from which it can be estimated that the annual local production of Chinese cars in Thailand is roughly 100,000 units), the estimated production share of China in Thailand remains far below its market share—production accounts for less than 10%, while sales approach 30%—a capacity gap that may cause dissatisfaction on the Thai side.
At the automaker level, even by 2026, sales for most Chinese automakers will continue to exceed local production (Figure 6). Not all Chinese automakers are following suit. Companies such as XPeng, Leapmotor, JAC, and Dongfeng have yet to announce investment plans.
For those companies with too few locally produced vehicles, Thai authorities have launched investigations: Hozon, which went bankrupt in China, is the first Chinese automaker to pay massive compensation due to insufficient local production. Unable to fulfill its offset obligations, Hozon was sued by the Thai government in January 2026, as the government seeks to recover the 2 billion baht (approximately 400 million RMB) in subsidies paid since 2022. Other similar cases may follow.
Rumors suggest that some Chinese automakers might choose to file for bankruptcy in Thailand to avoid paying hefty punitive compensation. The next critical question is whether Chinese factories can move beyond simple screwdriver manufacturing to create local value-added and employment opportunities through their supplier networks.
Currently, the localization rates reported by Chinese OEMs fluctuate between 40% and 60%—with 40% being the minimum standard for "Made in Thailand" stipulated by the China-ASEAN Free Trade Area (CAFTA). In contrast, the localization rates for most Japanese automakers in Thailand range from 70% to 80% (Figure 7).
Of course, this is largely a matter of time: Japanese automakers began production in Thailand in the 1960s and 1970s, when value-added was also very low. However, due to localization requirements and their long-term operations in Thailand, localization rates improved in the 1970s and 1980s. For Chinese automakers, the challenge lies in how to maintain price competitiveness after the implementation of localization requirements, especially since many rumors suggest that our domestic advantages seemingly rely on a highly resilient supply chain and industrial workforce.
At this stage, the volume of auto parts imported into Thailand from China continues to surge. In 2025, China has already surpassed Japan to become Thailand's largest supplier of auto parts (Figure 8). Thailand is rapidly becoming a key export market for suppliers benefiting from increased automotive electrification (such as producers of connectors, cables, or automotive electronics), encompassing both Chinese and international suppliers.
However, Chinese automakers are also beginning to establish partnerships with established international suppliers. For instance, the French supplier Forvia, already a partner of BYD in China and with long-standing operations in Thailand, has formed a joint venture with BYD in Thailand to establish a seat factory capable of supplying up to 180,000 sets of car seats annually. Once fully operational, the plant is expected to become profitable in 2025.
Some automakers are also bringing their Chinese partners to Thailand. Great Wall Motor has introduced five affiliated Chinese suppliers to Thailand. These suppliers include: SVOLT Energy, providing battery packs; Hycet Engine Systems, providing engine and powertrain components; Nobo Automotive, providing interiors and seats; Mind Automotive Parts（Mind）, providing body and structural parts; and Exquisite Automotive, providing other auto parts (Figure 9).
Finally, some Chinese auto suppliers may be utilizing Thailand to circumvent scrutiny of Chinese components in key markets such as the United States. For example, Hesai Technology, a leading Chinese LiDAR manufacturer, plans to mass-produce LiDAR systems in Thailand for non-Chinese customers starting in 2027. Battery manufacturing currently remains a massive missing link.
Unlike in Europe, where Chinese companies have achieved localized production of EV batteries, cathodes, and anodes, Chinese companies' EV investments in Thailand do not involve much battery business, and Chinese EVs produced in Thailand rely heavily on batteries imported from China.
If Chinese companies can achieve localized production and offset imports, Japanese OEMs will suffer the greatest losses, and Japanese and Thai suppliers will also face pressure. Some suppliers may be able to collaborate with Chinese OEMs, but for most traditional suppliers, the business lost from existing Japanese OEM clients will outweigh the gains from establishing new relationships.
Chinese domestic suppliers, whether local or international, are most likely to gain new growth opportunities. More broadly, the beneficiaries will be those companies that align with the trends of electrification and the development of electronic product supply chains, while those related to internal combustion engines will be impacted.
Hurdle Three - The Geopolitical Challenge
Finally, the localization capabilities of Chinese automakers will be key to coping with future political tests. Over the past year, Thailand, especially the automotive industry, has grown increasingly concerned about the potential economic and employment costs of China's entry into the Thai automotive market.
If Chinese EVs ultimately replace Japanese and other automakers, which typically have higher localization levels, this could have a negative impact on Thailand's automotive industry. Given that the industry directly employs approximately 650,000 people, indirectly supports about 1 million jobs, and contributes roughly 10% to 11% of GDP, the impact cannot be underestimated.
The National Economic and Social Development Council (NESDC) of Thailand estimates that by 2025 and 2026, approximately 110,000 workers (16.3% of the automotive industry workforce) may face the risk of unemployment—due to persistently low car production and the inability of some parts manufacturers to quickly adapt to the EV transition. Recently, Thai automotive industry groups wrote to the Thai government, warning that the automotive industry could face a crisis if EV adoption leads to a contraction in local production.
At that time, manufacturers will struggle to compete with cheap, zero-tariff imports from China, and parts manufacturers will lose orders. The letter, co-signed by ten business associations representing over 1,500 members, urges the government to adopt a series of measures, including tax system reforms to support locally produced EVs, imposing a 32% excise tax on complete vehicle imports, tightening localization rate regulations, mandating a higher proportion of Thai raw materials, linking import quotas to domestic production and technology transfer, and strengthening rules of origin. The impact of this letter and the growing calls for protectionism remains to be seen.
Thailand is currently satisfied with the pace of automotive electrification, and given the solid current relationship between Thailand and China, it is unlikely that strong defensive measures against Chinese EVs will be taken. However, if pressure continues to accumulate, the government may opt to implement more fragmented measures, including tightening local production rules, further expanding the scope of mandatory locally sourced parts, enacting stricter end-of-life vehicle regulations, and/or extending EV subsidy programs to hybrid electric vehicles (HEVs)—a sector currently still dominated by Japanese automakers.
In the long run, the rise of China's automotive industry will bring pressure to Thailand's automotive sector, which will also exacerbate current debates.
First, it will disrupt the supply chain system originally built by Japanese brands, forcing the traditional supply chain centered around Japanese automakers to transform towards electrification and intelligence.
Second, it will impact the complete vehicle export system originally built by Japanese brands. For example, increasingly fierce competition from China in third-country markets will have a growing impact on Thailand's automotive exports (one of Thailand's major export categories). Affected by the Iran war and a significant decline (-37%) in Thailand's automotive exports to Australia and Oceania, Thailand's automotive production in May dropped by nearly 18%. The latter is driven by stricter carbon emission control regulations and the aggressive expansion of Chinese EVs.
All of these ultimately boil down to the transformative changes in Thailand's industry.
Conclusion
The automotive industry is a comprehensive sector that requires countries with a certain industrial foundation. Generally, in countries with an existing automotive base, the industry accounts for employment of about 10% of the population and 5% to 10% of GDP; it can be said that the automotive industry is a massive single industry. Its changes will trigger significant economic and political shifts. The overseas expansion and achievements of Chinese cars in Thailand have basically gone through, and perhaps touched upon all possible areas of impact, to reach the current relatively good results. Therefore, it may be able to build some replicable experiences and frameworks of attention for Chinese automakers going global.
Based on the above, the following framework points can be summarized:
First, trade agreements and local policies, which basically determine the fundamental base for Chinese automakers going global. It is necessary to understand and master the trade agreements between the exporting country and China, as well as local automotive policies, especially their trends.
Second, the fiscal trends of the exporting country. Of course, product design first needs to consider the local economy and fiscal situation, but more importantly, it is crucial to understand the fiscal changes in the exporting country, especially those related to support for the automotive industry.
Third, the localization rate of exported products. For a comprehensive product manufacturing industry like automotive, the localization rate is related to costs, policy changes in the exporting country, and the foundation of the local industry. Therefore, attention must be paid to this indicator, and different hypotheses and planning directions should be constructed based on it.
Fourth, geopolitics. This is a particularly sensitive topic that comprehensively integrates the economic development, employment, and other comprehensive factors of the exporting country, all of which require holistic consideration. Of course, the journey for Chinese automakers going global is long and arduous. Thailand can be considered the starting point and entry level, but there are still many variables in the future; we can only say that we will continue to pay close attention. References and images.
- How Chinese Cars Conquered Thailand - Rhodium Group
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